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Dow Jones, S&P 500 Outlook – Watch How Price Action Unfolds in Down-move

Dow Jones, S&P 500 Highlights:

  • Dow Jones working its way back lower
  • S&P 500 struggling around broken bull market line

A few scenarios for the Dow & S&P to consider on weakness

Last week, the discussion was about whether the low was in for now, with the focus turning towards gap-fills on the top-side. While the big gap in the S&P from March 12 up to 2741 still looks likely to get filled at some point in the relatively near future, the question is how jagged the path to that level (maybe higher) will be.

The pullback in progress could end soon and a higher-low develop, a sort of half-test of the March low, if you will. But if momentum starts to pick up then the likelihood of getting a full retest of the 2191 low or worse quickly increases.

Ideally, on the move lower we get a sort of ‘jab-and-go’ where the market sharply turns back to the top-side in a manner that gives confidence that it has rejected lower levels. This could set up for another leg towards 2641 and then the first major gap-fill at 2741.

However, if momentum starts to pick up then we will want to see how price behaves on approach to the 2191 low. A rejection at that juncture could then constitute the retest that many are looking for, or, if it breaks a quick flush may happen as the market panics before reversing higher.

In any event, it appears we are near a low if it hasn’t already been put in, but trading is going to be a bit tricky. Traders need to remain flexible and ready to adjust their outlook quickly to rapidly-changing circumstances.

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S&P 500 Daily Chart (retest or worse?)

S&P 500 daily chart, retest or worse

The Dow Jones is of course acting similarly since tagging the 2015 low as a bottom for now. Using the same template outlined about, 18213 is the big low to watch. On the top-side resistance clocks in at 22595 and then the March 12 gap-fill up to 23553.

Dow Jones Daily Chart (levels to watch)

Dow jones daily chart

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—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX